Many companies are jumping halfway onto this new bandwagon by keeping the traditional software but overhauling their licensing terms. Instead of a perpetual license with a large fee, they charge an ongoing subscription fee.

This solves a couple of consumers' gripes. It makes it easier to spread the expense out over time, which the green-eyeshade guys always like, and it gets the companies off the upgrade treadmill, or rather, it puts them on it, but more straightforwardly. The vendor is not given the perverse incentive to produce flashy new functionality or engage in dirty tricks like messing with file formats that will entice or compel users to upgrade. Instead, they must provide consistent value and steady improvement that will make the user feel that the subscription is paying off. And depending on the terms of the contract, the user may find it easier to walk away from software that isn't performing as advertised.

The Combo Shots

All of the issues that we've discussed are having an impact on the software industry, but what might have the biggest impact is that some of these issues are "ganging up" to deliver a one-two punch.

Open Source + Piracy

There are many countries in the world where most people, including legitimate businesses, do not pay for software licenses. This is not a sustainable state of affairs, however. Eventually, those governments will have to crack down on copyright violation, or they'll have a hard time negotiating trade agreements with the United States and Europe. So individuals, and especially businesses, will have to go legit at some time. There are two ways of going legit, however; they can start paying for commercial software, or they can foreswear it.

For example, Microsoft's alleged tactic of looking the other way while developing nations become hooked on Windows might not pan out. Many developing countries see the benefit of having more control over the platforms that they base their new information economies on, and open source software is a great opportunity for them to exercise that control but not have to start at square one. China has famously adopted its own Linux distribution, Red Flag. Similarly, there's a lot of Linux activity in India. In both nations, there is a considerable amount of brainpower to tap and limited capital. That could mean huge advancements in open source platforms that become popular in those areas, and commercial vendors like Microsoft may never see those countries open up to their products like they'd hoped.

In another odd bit of synergy, P2P technologies like Bittorrent were developed to make it easier for individuals to share files with millions without having thousands of dollars in bandwidth charges. Of course, these P2P networks became popular ways of trading unauthorized mp3s, software and movies. But now that these systems are in such widespread use, it makes it even easier for open source developers to release a hot new project into the world, even without a fat pipe.